The issue:

Terrorism activities after the event of 9/11 have adversely affected the economy
of Pakistan. First, Pakistan observed an immediate flood of Afghan refugees,
which spilled terrorism into Pakistan. Second, the Indian insurgency in
Pakistan, particularly in Balochistan province, through Afghanistan has also
increased terrorist activities because terrorists obtain financial and military
support from India. Terrorism activities have adversely affected economic growth
in Pakistan. This is demonstrated in the figure below, which shows an adverse
relation between the two variables, i.e., when terrorism is low, economic growth
is high, and when terrorism is high, economic growth is low. To overcome
terrorism, a significant share of human and financial resources have been
allocated for security purposes.

Figure 1: GDP growth and deaths by suicide attacks in Pakistan (2002–2015).

Economic costs:

In the last 17 fiscal years since the event of 9/11, Pakistan’s economy has
suffered a direct and indirect cost linked to terrorist activities of almost $126.79
billion, which is equal to Rs.10762.14 billion. Further substantiated by the
following table:

Figure 2: Direct and indirect cost of terrorism (2002–2014)

Further, normal economic and trading activities have also been disrupted, which
has increased the cost of doing business. Terrorism has also adversely affected
Pakistan’s international trade. As a result, Pakistan has lost its market share and
therefore remains unable to achieve its targeted growth rates. The following table
shows the loss to Pakistan’s economy due to terrorist attacks by sector during
the fiscal years 2014–15 and 2015–16.

Figure 3: Losses by sector due to terrorist attacks.

It is evident from the table that foreign investment, tax collection and exports
have been badly affected due to terrorism.

Remedial measures taken up by the authorities in Pakistan:

To overcome the threat of terrorism, the government of Pakistan launched a

military operation (Zarb-e-Azb) against terrorists without any discrimination in its
territory near the Pakistan-Afghan border in June 2014. Subsequently, in
December 2014, the government of Pakistan also began the National Action Plan
(NAP) to take preventive measures against terrorism. Both the military operation
and the NAP have remained successful and have improved security conditions in
the country. This improvement has formed a suitable atmosphere for business
and investment in the country and has decreased the losses to the economy.
However, Pakistan needs to increase productive capacity by restoring damaged
infrastructure and to adopt a favorable investment atmosphere. Further, the
stability in neighbouring Afghanistan is fundamental to completely revitalise
Pakistan’s economy and to sustain stability in the system.